Wednesday, January 7, 2009

Global Demand for Gold on the Rise

Bespoke has an interesting post showing how much gold has rallied in recent years relative to silver. Gold Research and Statistics details where the demand has come from:

Gold demand, in tonnage terms, rebounded strongly in Q3 after several quarters of weakness. Identifiable demand totalled 1,133.4 tonnes, up 170.1 tonnes (18%) on the levels of a year earlier. In US$ value terms, this represented a 51% rise to $31.8 billion, an all-time record high and a 45% leap from the previous record set in Q2. The recovery in demand was triggered by a fall in the gold price, which coincided with sharply escalated levels of economic and financial uncertainty.

After briefly testing levels above US$950/oz early in the quarter, the gold price fell back, briefly touching levels under $750/oz in mid-September. Nevertheless, the average for the quarter, at $872/oz, was 28% higher than Q3 2007’s $680/oz.The biggest contributor to the increase in total identifiable demand in Q3 was identifiable investment, up 137.5 tonnes (56%) relative to year-earlier levels. Jewellery demand rose 45.5 tonnes or 8%, while industrial and dental demand declined 11%.

It will be interesting to see what happened in Q4. My guess? Demand for jewelry is down a ton, but demand from bar hoarding and ETFs is up dramatically.

Source: World Gold Council


  1. Hey Jake -

    Something you may not know - in much of the non-western world, jewelry isn't just something that you buy the wife on Valentine's day - because of government regulation, it also substitutes for bar hoarding. This is especially true in India (where the preferred "jewelry" is a large gold rope of a necklace) and China (to a lesser degree).

    So it might be that jewelry will tank next quarter - or not, as panicked Indians buy large quantities of gold jewelry out of fear.